Bitcoin showed some signs of strength after the recent yearly low. However, it is once again primed for another decline now that we have seen the bulls lose momentum. The price now risks a decline not only below $4k but I think we could see it take out the previous low of $3.8k this time. This is not unreasonable to expect considering BTC/USD did something similar in October last year. Financial markets worldwide are still in panic and the fear is real because the Coronavirus outbreak has seriously crippled all walks of life from daily activities to businesses and global economies.
The S&P 500 (SPX) plunged below the 200-week moving average once again and not just that, it ended up falling below the 38.2% fib level. This is a very bearish development. The index had the opportunity to recover after a very bullish close above the 200-week moving average last week. After that, the Fed announced that it was going to inject $1.5 trillion in the markets and that should have done the job and seen the market recover but it didn’t. This means the fear is very different this time. Most investors already realize that the stock market is way overbought and we were just short of a catalyst that could bring it down and the Coronavirus outbreak now seems to be that catalyst.
In all fairness, it is still quite improbable for the market to just decline straightaway from current levels. However, anything is possible and it would not be unusual for the market to decline further considering it did not capitalize on such a good bullish opportunity earlier. For the cryptocurrency market, this means carnage. We are seeing everything from Gold (XAU/USD) to WTI Crude Oil (USOIL) go down. Bitcoin and the rest of the crypto market is a very small market in comparison and also a lot riskier. It seems that BTC/USD is waiting for the next signal from the stock market. If we see the S&P 500 (SPX) decline again, Bitcoin may be headed below $4k in the near future.
